What Metrics help best to achieve Predictable SaaS Growth?

5 uncommon metrics to consider to influence the growth predictability of your B2B SaaS business.

A question I regularly get is: “What metrics should we track to understand if we’re on the right track toward predictable SaaS growth?”

Enough has been written about the basic SaaS metrics: Monthly Recurring Revenue (MRR), Net Revenue Retention (NRR), Customer Acquisition Cost (CAC), Customer Lifetime Value (CLV), and the list goes on.

And while they are essential, they’re still insufficient to prevent too many B2B SaaS companies from getting into trouble. Just keep your ear out for all the stories about the decline and stress many SaaS founders have dealt with over the past 12 months.

The quality of each metric mentioned above is heavily influenced by the action that we put in to not only make it grow (or decline) – but make it grow sustainably. And that’s where the problem hides.

To help solve this problem, I decided to dedicate this essay to detailing 5 uncommon metrics to consider to influence predictable SaaS growth. Here’s the list.

  1. Mission Critical Pain score
  2. Pipeline Differentiation Match score
  3. Fear of Messing up score
  4. Sale-cycle velocity trending
  5. ARR per Employee

Let’s start with the first: Mission Critical Pain Score

Predictable SaaS Metric 1: Mission Critical Pain score

The first uncommon metric that’s valuable to embrace is what I refer to as the “Mission Critical Pain Score.”

It lets you get a feel for a critical ingredient for sales: Urgency.

Here’s the thing:

If deals are postponed, it’s 9 out of 10 because they consider your product a ‘Nice to have.’

That doesn’t mean there’s no urgency at all. To the contrary.

In the bigger scheme of the company, other projects have a higher priority.

You can only invest your money once – right?

That’s true for you – and so is it for your customer.

To prevent getting sidelined as ‘nice to have,’ each deal must address a mission-critical pain.

 

How?

Here is a trick I always leverage in my repositioning projects with customers: Connect project goals with company targets.

In other words, how does solving a problem deep down in the operation [the focus of your deal] positively influence a target that keeps the CEO up at night?

Why is this important? This way, your champion has a story to keep your deal high on the priority list IF they have to convince execs higher up in the organization.

How do you create the Mission Critical Pain score?

For each pain you’ve identified, ask yourself (or your prospect):

  • On a scale of 1-10 – how valuable will it be to solve this problem?
  • On a scale of 1-10 – how critical will it be to solve this problem?
  • On a scale of 1-10 – what’s your ability to exceed expectations solving it?

It becomes a formula: (Value x Criticality x Exceed expectation) = Mission Critical Pain score.

You’re in the correct zone for problems that score + 500.

Any deal in the pipeline does not showcase a single pain point scoring +500, disqualify them, and move on.

 


Question for you to reflect upon:

If you randomly review ten deals in your pipeline, how many have a mission-critical pain score of +500? What if that was 10/10?


 

Now let’s move to the second uncommon metric: Pipeline Differentiation Match score.

Predictable SaaS Metric 2: Pipeline Differentiation Match score

You might think: What’s that?

It’s THE indicator you will win the bulk of what’s in your pipeline.

Here’s the thing:

In essence, Sales is about three simple questions:

  1. Will they buy?
  2. Will they buy now? (see Mission Critical Pain score)
  3. Will they buy from us?

To quantify the last question, you have to ensure the attitude of your prospect towards your differentiating approach is ‘positive.’

What does this mean?

Your prospect sees, understands, and acknowledges HOW you solve the problem differently and WHY that will result in a shift in value creation for them. Not 10%, but 10x.

Let me give an example. At Unit4, the DNA of our flagship ERP product enabled our customers to be extremely nimble in running their business. They could acquire and merge companies in hours, respond to new regulations in minutes, and reorganize business processes in seconds.

So, for the right ones, it gave a competitive advantage. Their ‘positive’ attitude towards our approach resulted in win rates of +80%. For those that had a ‘neutral’ attitude: <20%.

It’s not enough to only focus on the Mission Critical Pain score. It’s critical your potential buyer ‘buys in’ to your approach to solve their mission critical problem. Without that your deal is in jeopardy.

Average SaaS companies register all buy intent in their pipeline.

Remarkable SaaS companies register a high propensity to ‘buy from us.’

 


Question for you to reflect upon:

What’s the Pipeline Differentiation Match Score for your SaaS company? What if it was 100%


 

Let’s move to the third uncommon metric: Fear of Messing up Score.

Predictable SaaS Metric 3: Fear of Messing Up Score

You know what I am talking about if you have read the book ‘The Jolt Effect.’

In short, many sales in your pipeline don’t slip because your prospect doesn’t agree they need to move. They do agree! In fact, they often even realize they need to move to your solution.

What stops them is the Fear of Messing up.

That makes them indecisive.

It makes it a fundamental metric to consider to build predictable traction.

So, how do you measure?

On a scale of 1-10, What’s your customers’ ability to decide?

The lower this number, the higher the risk for you that a deal will still slip – no matter how much they acknowledge the pain, the urgency of solving it, and the fact you can solve it best.

Note this is not about having the seniority to decide.

It is about having the guts to decide.

But how do you know if it’s a 4, a 6, or an 8? Here’s where it helps to look at three ingredients.

According to the authors of the Jolt Effect, three sources of indecision influence your customers’ ability to decide:

  1. Valuation problems – your customer is stuck between options and expresses confusion or uncertainty about. which one is best for their needs.
  2. Lack of information – your customer feels anxiety or confusion over their perception that they haven’t done enough research or homework to make an informed decision.
  3. Outcome uncertainty – your customer expresses concern, skepticism, or anxiety about whether they’ll get what they’re paying for.

My recommendation: Rate each of these individual sources, add them up, and divide by three.

In short:

Many deals don’t slip because of fear of missing out

The majority slip because of the fear of messing up.

 


Question for you to reflect upon:

How many deals in your pipeline are stuck because of your prospect’s fears of messing things up?


Predictable SaaS Metric 4: Sale Velocity Trending

A clear sign remarkable SaaS companies are famous for is Healthy Sales Velocity.

Sales velocity tells how quickly a prospective customer moves through your sales pipeline and generates revenue.

The formula: ([# of qualified opportunities] X [Average deal size] X [Average win-rate]) / [length of the sale cycle (in months)] = Sales Velocity

I value this metric because it incorporates all the ingredients that matter – and prevents you from tricking the system. For example, if you use discounting to improve win rates and the sales cycle length, it will still bring sales velocity down.

But just having the number is not enough. To know if you’re well on your way toward predictable SaaS traction, keep an eye on what I call Sales Velocity trending.

Here’s the thing:

The velocity number itself is not that important (because every SaaS solution and market is different), but the trend is. Does it go up or down?

If the sales velocity number increases over time, it tells you a lot about the health and productivity of your sales team and your relevance in the market. If it decreases, it’s a solid early sign of trouble.

(Note: make it long enough to overcome the influence of seasonality.)

What helps build a healthy Sales Velocity?

  1. The precision by which you define who you target (and who not),
  2. How well you’re positioned to solve their most valuable AND critical problem.
  3. The clarity and relevance of your value proposition
  4. The ability of your sales team to communicate that value (instead of features)

Relevance is the magic word here.

But relevance varies over time – because the market is so dynamic.

The sales velocity metric gives you a viable indicator of that increasing or decreasing relevance.

Take it seriously.

 


Question for you to reflect upon

How has your SaaS business’s sales velocity been trending over the last six months? What does that tell you?


Predictable SaaS Metric 5: ARR per FTE

This metric gives you more of an overall health signal whether you’re moving towards predictable SaaS traction. Extremely valuable, but often overlooked because we’re too obsessed with pushing all growth metrics.

Just to illustrate this – I recently overheard an amazing story from a SaaS founder who was hammered by his VC for not meeting hiring goals. Now, I get the drill, but the fact was…., they smashed revenue expectations.

Metrics are great – but not if they drive us to lose perspective on what’s actually essential.

I get that the focus is 100% on growth – but we shouldn’t forget the efficiency of that growth. And that’s where ARR per Employee (APE) comes in.

ARR per FTE is the most honest metric in the world – especially if predictable growth is what you’re aiming for.

SaaS companies with high ARR per Employee create leverage, i.e., their ability to scale and do more with less. And isn’t that what SaaS should be all about?

Kyle Poyar recently published some new data from 700 private SaaS companies that show what to aim for.

  •  $1-5M ARR: $150k ($90k is median)
  •  $5-20M ARR: $268k ($167k is median – ⬆️ from $106k in 2022)
  •  $20-50M ARR: $292k ($212k is median – ⬆️ from $145k in 2022)

But keep an eye on the top 5: Expensify: $1,260K, Dropbox: $768K, Adobe: $635K, Shopify: $598K, and Palantir: $546K. But I have had companies on my podcast that are way smaller, doing $600K+ with <25 FTE.

When the median is rising in your company, that’s a good thing.

  • Profit increases.
  • Resourcefulness gets better.
  • Communication remains easier (fewer lines).

It’s a sign that your product market fit is getting stronger.

And all of this means: You’re able to perform a lot better – in good and bad times.

 


Question for you to reflect upon:

What’s the ARR per Employee for your SaaS business today vs last year? What does that tell you?


 

In Summary: Key Metrics for Predictable SaaS Growth

90+% of SaaS companies focus on pushing growth.

But the top 10% know the focus should be on predictable growth.

The trick is, making growth predictable ain’t easy.

You need to understand which metrics to follow on top of the obvious ones;

  • Monthly Recurring Revenue (MRR)
  • Net Revenue Retention (NRR)
  • Customer Acquisition Cost (CAC) payback

While these are essential, tracking them can only get you so far.

And that what this essay has been all about: Understanding what metrics help best to achieve predictable SaaS growth?

In a nutshell:

  1. Mission Critical Pain Score.
    Does the problem you’re solving deep down in the operation [the focus of your deal] positively influence a target that keeps the CEO up at night?
  2. Pipeline Differentiation Match Score.
    Does your prospect see, understand, and acknowledge HOW you solve the problem differently and WHY that will result in a shift in value creation for them? Not 10%, but 10x.
  3. Fear of Messing up Score.
    On a scale of 1-10, What’s your customers’ ability to decide?
  4. Sales Velocity Trending
    How’s the health and productivity of your sales team and your relevance in the market developing?
  5. ARR per FTE
    How is your ability to create leverage, i.e., your ability to scale and do more with less developing?

 

Remember

Many metrics will give you a quantitative indication of growth.

Following these metrics will give you a qualitative indication of growth: Predictable growth

 

Good luck!

 


Question for you to reflect upon

How much would the quality of your pipeline improve if you’d start review each deal on the first three metrics tomorrow?


Additional resources to help you achieve predictable growth in your SaaS business.

The easiest way. Book a free call to explore if there’s a fit to do this together.

Otherwise – here are three other options

 

A daily email for B2B SaaS CEOs who want to end unpredictable traction.

About the author

Sales Pitch

Ton Dobbe is a former B2B software product marketer who's on a mission to save mission-driven SaaS CEOs from the stress of 'not enough' traction. He's the author of The Remarkable Effect, the host of the Tech-Entrepreneur on a Mission podcast, and writes a daily newsletter on the secrets to mastering predictable traction.